UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


WONSOVER, JACOB

v.

SEC


99-1167a

D.C. Cir. 2000


*	*	*


Karen LeCraft Henderson, Circuit Judge:


Jacob Wonsover petitions for review of the Security and  Exchange
Commission's (Commission) Order Imposing Re- medial Sanction and the
accompanying Opinion of the Com- mission (collectively, Sanction
Order) suspending him "from  association with any broker or dealer for
a period of six  months" and ordering him to cease and desist from
commit- ting or causing violations of sections 5(a) and 5(c) of the 
Securities Act of 1933, 15 U.S.C. ss 77e(a), 77e(c) (1933 Act).  Joint
Appendix (JA) 1, 2. Wonsover sold shares of Gil-Med  Industries, Inc.
(Gil-Med) which he knew were not registered  and whose sale therefore
violated the 1933 Act absent an  exemption from its registration
requirements. Finding that  no exemption applied, the Commission
determined that Wons- over violated sections 5(a) and 5(c). The
Commission also  determined that Wonsover's inquiry into the sources
of the  shares was inadequate under the circumstances and that his 
violations were therefore "willful" under section 15(b)(4) of  the
Securities Exchange Act of 1934, 15 U.S.C. s 78o(b)(4)  (Exchange


While he argues his sales of unregistered securities were  exempt from
the 1933 Act's prohibition, Wonsover primarily  disputes the
Commission's finding of willfulness, contending  his inquiry regarding
the unregistered shares was adequate  to preclude such a finding.
Wonsover also argues that the  sanction is draconian and that the
public interest would be  better served by reducing it to a censure.
He requests that  we vacate the Commission's Sanction Order or, in the
alterna- tive, reduce the sanction to censure.


Substantial evidence supports the Commission's conclusion  that
Wonsover acted without adequate inquiry under the  circumstances, in
violation of sections 5(a) and 5(c) of the 1933  Act, and we hold that
the Commission did not err in deter-


mining that the violations were willful. The sanction was not  the
maximum the Commission could have imposed and we  defer to the
Commission's discretionary determination. Ac- cordingly, we deny
Wonsover's petition for review.


I.


Wonsover began his career in the securities industry in  1981.
Approximately five years later he met Shimon Gibori,  the founder and
CEO of Gil-Med. Gil-Med made an initial  public offering in early
1998, registering with the Commission  1,050,000 shares (of 4,605,686
outstanding) for sale to the  public. This, the only stock Gil-Med
registered, was traded  publicly on the NASDAQ System. On the whole,
the stock  did not have much activity; its market was "thin." JA 841, 
1103-06. Henry Vogel, a behavioral therapist and Gibori  associate who
invested in and promoted Gil-Med, sold shares  to his friends,
associates and patients during 1988 and 1989.  Informed of the
difficulty shareholders were having in selling  the stock, Gibori and
Vogel directed them to certain broker- age firms for help. The
shareholders found less than com- plete success and Gibori ultimately
referred them to Wons- over, who was working at Paine Webber, Inc.


Between August 1989 and October 1990 Wonsover opened  accounts for
nineteen purported Gil-Med shareholders whose  names were supplied to
him by Gibori.1 Some of the share- holders did not exist while others
no longer owned the Gil- Med shares held (and later sold) in their
names.2 Wonsover  sold a total of 924,000 shares of unregistered
Gil-Med stock.  In light of the applicable statute of limitations, the
Commis- sion focused on the sale of 665,000 shares for seven of the 
nineteen shareholders because the sales occurred within five  years of
the Commission's institution of proceedings against 




__________

n 1 Counsel for petitioner conceded at oral argument that Wonsover  had
personally met none of the shareholders, with the possible  exception
of Vogel.


2 Gibori and Vogel had earlier bought shares back from certain 
investors who had experienced difficulty selling them.


Wonsover.3 Sales from the seven shareholders' accounts  generated more
than $300,000 in proceeds.


Wonsover understood that the clients held "restricted" Gil- Med stock.4
The sale of restricted stock generally is forbid- den by 15 U.S.C. s
77e. Wonsover, however, asserts that the  sales were covered by the
exemption found in section 4(4) of  the 1933 Act, 15 U.S.C. s 77d(4),5
or at least that he reason- ably believed they were covered by the
exemption.6 He  directed all potential sales of Gil-Med shares through
Paine  Webber's Restricted Stock Department (RSD) for clearance  and
contends that this, along with some less substantial  efforts,
constituted adequate inquiry into the restricted na-




__________

n 3 In this opinion we refer to facts surrounding the sales of Gil- Med
shares without distinguishing the seven shareholders from the 
remaining twelve. The information available to Wonsover regard- ing
sales and accounts for the twelve Gil-Med shareholders whose  accounts
are not included among the seven accounts at issue is  relevant to his
culpability for activity involving the seven Gil-Med  accounts the
Commission reviewed inasmuch as they shed light  either on Wonsover's
knowledge of and investigation into the back- ground of the
unregistered shares or on his sale of the shares  without knowing of
their background or adequately investigating it.


4 "[R]estricted" stock is defined as "[s]ecurities acquired directly 
or indirectly from the issuer, or from an affiliate of the issuer, in
a  transaction or chain of transactions not involving any public
offer- ing." 17 C.F.R. s 230.144(a)(3)(i).


5 This section exempts "brokers' transactions executed upon cus-
tomers' orders on any exchange or in the over-the-counter market  but
not the solicitation of such orders." 15 U.S.C. s 77d(4). The 
exempted "brokers' transactions" are further defined in the Com-
mission's regulations and the portion Wonsover relies on covers 
"transactions by a broker in which such broker ... [a]fter reason-
able inquiry is not aware of circumstances indicating that the  person
for whose account the securities are sold is an underwriter  with
respect to the securities or that the transaction is a part of a 
distribution of securities of the issuer." 17 C.F.R. s


6 Wonsover no longer argues that the transactions were covered  under
various other exemptions, as he did before the Commission,  see JA
10-17.


ture of the stock. The referral to the RSD notwithstanding,  Wonsover
did not show during the administrative proceedings  that he had
acquired adequate background information on the  Gil-Med stock.
Specifically, he could not produce investment  executive worksheets
for any of the nineteen account-holders.  The worksheets, which he and
other Paine Webber brokers  ordinarily complete when requesting
clearance from the RSD,  reflect how and when the shareholders
acquired the shares at  issue. Nevertheless, he claims the RSD
contacted Gil-Med's  transfer agent, its lawyers and its auditors and
ultimately  approved every sale of Gil-Med stock. Wonsover also cites 
written confirmation he received from Gil-Med's transfer  agent and
attorneys that the sales were legitimate. He  claims to have been
duped by Vogel pretending to be one of  the listed, fictitious
customers (Haim Cheap). In fact, Wons- over relies on how elaborate
and effective Gibori and Vogel's  ruse was7 in arguing that his
actions were not willful viola- tions of the 1933 Act.


Early in the administrative proceedings Wonsover freely  admitted (but
would later recant) that he made no inquiry  into how or when the
Gil-Med shareholders acquired their  stock. See, e.g., JA 836, 846-48.
Instead, he passed the duty  of inquiry to Paine Webber's RSD and
lawyers. See JA 836.  The Commission demonstrates that several "red
flags" should  have alerted Wonsover to the fact that Gibori in fact
con- trolled the unregistered shares Wonsover was selling and, 
therefore, no exemption was available.8 Those red flags  include
Gibori's exercise of an unusual amount of control over  the nineteen
accounts. He delivered account documentation,  picked up proceeds
checks and held trading authorization for  at least two accounts. Some
purported shareholders resided 




__________

n 7 A separate civil action left Gibori permanently enjoined from 
serving as an officer or director of a public company. Vogel  resolved
the Commission's charges through settlement. See JA 5  n.7.


8 The Commission concluded that Gibori, as the founder and CEO  of
Gil-Med who controlled the Gil-Med accounts, was in effect an 
underwriter, making the exemption inapplicable. See supra note 5.


overseas. Fourteen of the nineteen listed Gil-Med headquar- ters as
their official address and many listed Gil-Med's  telephone number
too. Despite the foreign mailing addresses  of three account holders,
Wonsover heeded Gibori's instruc- tions and directed their checks to
Gil-Med and their corre- spondence to Gil-Med to Gibori's attention.
Similarly, many  of the accounts contained suspicious information.
Some ac- count forms represented U.S. citizenship while corresponding 
W-8 forms certified foreign citizenship. Several had identical 
personal addresses in Tel Aviv and identical bank references.  Some of
the stock certificates forged by Gibori and Vogel,  which the
Commission believes were amateurishly forged,  listed only a surname
that, in one instance, was misspelled.


In addition to their relation to Gibori, the shareholders also  had an
affiliation with Gil-Med. Some used Gil-Med head- quarters as their
personal mailing address and some even  identified their occupation as
sales representatives for Gil- Med. Another red flag was that the
nineteen shareholders,  collectively, sought to sell a substantial
block of Gil-Med  (924,000 shares, nearly equaling the entire public
float of  1,050,000), a stock Wonsover knew was not widely traded. 
The Commission also notes that the S-18 registration state- ment of
the 1998 offering reflected no ownership by any of  the nineteen
shareholders and thus directly contradicted  Wonsover's stated belief
that those shareholders acquired  their shares in 1986 or 1987 in
private placements. See JA  1179-80. The last red flag the Commission
identifies was the  difficulty in clearing the sales with the Gil-Med
transfer  agent and the RSD, a difficulty Wonsover was aware of and 
which he had not encountered in gaining approval for sale of  properly
exempt, restricted stock in the past. In response to  the RSD's
hesitation, he made repeated telephone calls to  push for its
approval, including falsely claiming the sharehold- ers were poor and
needed the money immediately. See JA  982.


In a detailed opinion, the Commission affirmed the adminis- trative law
judge's (ALJ) conclusion that Wonsover violated 


sections 5(a) and 5(c) of the 1933 Act, 15 U.S.C. s 77e,9 and  that the
violations were willful under section 15(b)(4) of the  Exchange Act,
15 U.S.C. s 78o(b)(4),10 which grants the Com-




__________

n 9 s 77e. Prohibitions relating to interstate commerce and the 


(a) Sale or delivery after sale of unregistered securities


[Section 5(a)] Unless a registration statement is in effect as  to a
security, it shall be unlawful for any person, directly or 
indirectly--


(1) to make use of any means or instruments of transporta- tion or
communication in interstate commerce or of the mails to  sell such
security through the use or medium of any prospectus  or otherwise;


(2) to carry or cause to be carried through the mails or in  interstate
commerce, by any means or instruments of transpor- tation, any such
security for the purpose of sale or for delivery  after sale. . . . 
(c) Necessity of filing registration statement


[Section 5(c)] It shall be unlawful for any person, directly or 
indirectly, to make use of any means or instruments of trans-
portation or communication in interstate commerce or of the  mails to
offer to sell or offer to buy through the use or medium  of any
prospectus or otherwise any security, unless a registra- tion
statement has been filed as to such security, or while the 
registration statement is the subject of a refusal order or stop 
order or (prior to the effective date of the registration state- ment)
any public proceeding or examination under section 77h  of this


15 U.S.C. s 77e.


10 Section 78o, entitled "Registration and regulation of brokers  and
dealers," reads in pertinent part as follows:


(b) Manner of registration of brokers and dealers . . . (4) The
Commission, by order, shall censure, place limita- tions on the
activities, functions, or operations of, suspend for a  period not
exceeding twelve months, or revoke the registration  of any broker or
dealer if it finds, on the record after notice  and opportunity for
hearing, that such censure, placing of 


mission authority to suspend brokers for willful violations of  the
1933 Act. The Commission suspended Wonsover "from  association with
any broker or dealer for a period of six  months" and, pursuant to 15
U.S.C. s 77h-1, ordered him to  cease and desist from committing or
causing violations of  sections 5(a) and 5(c) of the 1933 Act. See JA


II.


We review the Commission's findings of fact for substantial  evidence.
See Steadman v. SEC, 450 U.S. 91, 97 n.12 (1981)  ("Commission
findings of fact are conclusive for a reviewing  court 'if supported
by substantial evidence.' ") (quoting 15  U.S.C. ss 78y, 80a-42, and
80b-13); 15 U.S.C. s 77i ("The  finding of the Commission as to the
facts, if supported by  evidence, shall be conclusive."); see also
Steadman, 450 U.S.  at 96 (securities laws provide scope of judicial
review of  Commission disciplinary proceedings). As for the Commis-
sion's conclusions of law, we apply the standards set forth in  the
Administrative Procedure Act (APA) and "will set aside  [its] legal
conclusions only if 'arbitrary, capricious, an abuse  of discretion,
or otherwise not in accordance with law,' 5  U.S.C. s 706(2)(A)."
Proffitt v. FDIC, ___ F.3d ___, 2000 WL  19129, *3 (D.C. Cir. 2000).
Our review of the Commission's  sanction is limited both by the APA
and Supreme Court  precedent. See Norinsberg Corp. v. Department of
Agric., 47  F.3d 1224, 1227 (D.C. Cir.), cert. denied, 516 U.S. 974
(1995).  The APA limits our inquiry to whether the Commission's 
sanction was "arbitrary, capricious, an abuse of discretion, or 
otherwise not in accordance with law," 5 U.S.C. s 706(2)(A);  see
Norinsberg Corp., 47 F.3d at 1227-28, and the Supreme 




__________

n limitations, suspension, or revocation is in the public interest  and
that such broker or dealer, whether prior or subsequent to  becoming
such, or any person associated with such broker or  dealer, whether
prior or subsequent to becoming so associat- ed--


. . .


(D) has willfully violated any provision of the Securities Act  of
1933.... 


Court has told us not to disturb the Commission's choice of  sanction
unless it is either "unwarranted in law or ...  without justification
in fact." Id. at 1228 (quoting Butz v.  Glover Livestock Comm'n Co.,
411 U.S. 182, 185-86 (1973)  (ellipsis in original) (quoting American
Power & Light Co. v.  SEC, 329 U.S. 90, 112-13 (1946))); accord
Pharaon v. Board  of Governors of Fed. Reserve Sys., 135 F.3d 148, 155
(D.C.  Cir. 1998); Bluestone Energy Design, Inc. v. FERC, 74 F.3d 
1288, 1294 (D.C. Cir. 1996). "The main point is that a court  should
not second-guess the judgment of the Commission in  connection with
the imposition of sanctions, unless the [Com- mission] has acted
contrary to law, without basis in fact or in  abuse of discretion."
Svalberg v. SEC, 876 F.2d 181, 185  (D.C. Cir. 1989).


Wonsover contends that the Commission applied the incor- rect standard
in determining willfulness and, in any event, his  conduct was not
willful under either standard.11 He focuses  on the ALJ's articulation
of the willfulness standard: "It is  well-settled that a finding of
willfulness under [section  15(b)(4) of] the Exchange Act does not
require an intent to  violate, but merely an intent to do the act
which constitutes  the violation." JA 85. In his opening brief,
Wonsover ar- gued that the government must prove he acted with knowl-
edge that his conduct was unlawful, see Brief of Petitioner at  21,
but he subsequently changed the standard to reckless  disregard. See
Reply Brief at 3-9. While the Commission  did not endorse the ALJ's
standard, it expressly affirmed his  decision under either formulation
of willfulness, to wit: inten- tional commission of the act




__________

n 11 Although also arguing that the transactions were exempt under 
section 4(4) of the 1933 Act, 15 U.S.C. s 77d(4), Wonsover does not 
dispute that the accounts and sales involved a statutory underwrit-
er, a factor which ordinarily forecloses the exemption. See 17  C.F.R.
s 230.144(g). Rather, he claims he was ignorant of that fact  at the
time of the transactions despite what he contends was  reasonable
inquiry. If his contention were to hold, the exemption  might be
available to him. See id. s 230.144(g)(3). Our resolution  of this
issue, therefore, turns on whether Wonsover's inquiry was  reasonable
under the circumstances.


knowledge of (or reckless disregard of) the fact that his  conduct
violated the law. See JA 17-21.


Wonsover argues that to find willfulness where the actor  had no
knowledge that his conduct was unlawful would extin- guish the higher
degree of culpability the willfulness require- ment establishes in
what Wonsover calls a two-tiered system  of broker liability exposing
only willful violators to the more  severe sanctions of censure and
suspension. In other words,  he claims the Commission applied a
standard rendering the  Congress' use of "willfully" meaningless
instead of a standard  requiring proof of the actor's knowledge that
his conduct  violated the law or, at a minimum, that he acted in
reckless  disregard of the law. Most of the cases Wonsover relies on, 
however, apply to statutory schemes different from the 1933  Act and
the Exchange Act, see Brief of Petitioner at 21-22  (citing, for
example, Bryan v. United States, 524 U.S. 184  (1998) (statute
prohibiting unlicensed dealing in firearms);  Ratzlaf v. United
States, 510 U.S. 135 (1994) (antistructuring  laws for domestic
banks); TransWorld Airlines, Inc. v. Thur- ston, 469 U.S. 111, 129
(1984) (ADEA)), and several involve  criminal prosecutions, see id.
(citing, for example, Cheek v.  United States, 498 U.S. 192, 201
(1991) (income tax evasion)).  See generally United States v. O'Hagan,
139 F.3d 641, 647  (8th Cir. 1998) (distinguishing Ratzlaf and Cheek
from securi- ties cases). Wonsover does cite a Supreme Court opinion,
as  well as the Eighth Circuit's opinion on remand, interpreting 
section 10(b) of the Exchange Act. See, e.g., Brief of Petition- er at
22-23 (citing United States v. O'Hagan, 521 U.S. 642  (1997), on
remand 139 F.3d 641 (8th Cir. 1998)). The Su- preme Court rejected by
implication Wonsover's assertion  that one must know of the relevant
legal requirement for his  act to willfully violate that requirement.
See O'Hagan, 521  U.S. at 665-66 (discussing "two sturdy safeguards
Congress  has provided regarding scienter" first, that "Government 
must prove that a person 'willfully' violated the provision" and 
second (and independently), that "defendant may not be  imprisoned for
violating Rule 10b-5 if he proves that he had  no knowledge of the
rule") (emphasis added). On remand the  Eighth Circuit followed suit:


'willfully' in s 32 [of the Exchange Act] have reached the  same
conclusion that we reach in this case: 'willfully' simply  requires
the intentional doing of the wrongful acts--no knowl- edge of the rule
or regulation is required." See O'Hagan, 139  F.3d at 647.


Willfulness is usually understood to be contextual. See  Ratzlaf, 510
U.S. at 141 ("Willful ... is a word of many  meanings, and its
construction [is] often ... influenced by  its context.") (internal
quotation marks omitted) (quoting  Spies v. United States, 317 U.S.
492, 497 (1943)). In the  context of the provision at issue here, we
have rejected the  knowledge and the reckless disregard standards and
defined  willfulness thus:


It is only in very few criminal cases that "willful" means  done with a
bad purpose. Generally, it means no more  than that the person charged
with the duty knows what  he is doing. It does not mean that, in
addition, he must  suppose that he is breaking the law.


Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949) (internal  quotation
marks omitted). In Gearhart & Otis, Inc. v. SEC,  348 F.2d 798 (D.C.
Cir. 1965), we rejected the argument "that  specific intent to violate
the law is an essential element of the  willfulness required to
violate Section 15(b)" and noted that  the argument "ha[d] been
rejected by this court, by the  Second Circuit, and by the
Commission." 348 F.2d at 802-03.  We further stated that "[i]t has
been uniformly held that  'willfully' in this context means
intentionally committing the  act which constitutes the violation" and
rejected the conten- tion that "the actor [must] also be aware that he
is violating  one of the Rules or Acts." Id. at 803.


In his reply brief and at oral argument, Wonsover seized on  our
discussion of "willful misconduct" and "reckless disre- gard" in Saba
v. Compagnie Nationale Air France, 78 F.3d  664 (D.C. Cir. 1996), a
decision interpreting the Warsaw  Convention. Wonsover contends that
Saba, which discussed  cases involving securities laws, demands
application of a  subjective recklessness standard, a standard more
demanding  than ordinary reckless disregard. In Saba we acknowledged


the two recklessness standards we have applied and distin- guished the
more demanding subjective standard from the  one more akin to gross
negligence: "One meaning of reckless- ness, then, is simply a linear
extension of gross negligence, a  palpable failure to meet the
appropriate standard of care[,  and the] second, as we have recognized
in other contexts, is a  legitimate substitution for intent to do the
proscribed act  because, if shown, it is a proxy for that forbidden
intent." 78  F.3d at 668 (citation omitted). One of the "other
contexts"  the Saba court cited was the review of securities law
viola- tions. Describing that standard, the court said that either 
the defendant must have known the risk of violation his action 
presented or his action posed a risk "so obvious [he] must  have been
aware of it." Id. at 668-69 (quoting SEC v.  Steadman, 967 F.2d 636,
641 (D.C. Cir. 1992) (reversing  SEC's determination that appellants
violated section 17(a)(1)  of 1933 Act, section 10(b) and Rule 10b-5
under Exchange  Act and section 206(1) of Investment Advisers Act)).
In  other words, "if it can be shown that a defendant gazed upon  a
specific and obvious danger, a court can infer that the  defendant was
cognitively aware of the danger and therefore  had the requisite


Here, the Commission based its determination of willful- ness on
Wonsover's failure to conduct sufficient inquiry into  the sources of
the unregistered Gil-Med shares in the circum- stances before him. The
Commission's regulations permit a  broker's transaction if the broker
"[a]fter reasonable inquiry  is not aware of circumstances indicating
that the person for  whose account the securities are sold is an
underwriter with  respect to the securities or that the transaction is
a part of a  distribution of securities of the issuer." 17 C.F.R. s
230.144.  An oft-quoted paragraph of a Commission release clarifies 
when a broker's inquiry can be considered reasonable:


The amount of inquiry called for necessarily varies with  the
circumstances of particular cases. A dealer who is  offered a modest
amount of a widely traded security by a  responsible customer, whose
lack of relationship to the  issuer is well known to him, may
ordinarily proceed with 


considerable confidence. On the other hand, when a  dealer is offered a
substantial block of a little-known  security, either by persons who
appear reluctant to dis- close exactly where the securities came from,
or where  the surrounding circumstances raise a question as to 
whether or not the ostensible sellers may be merely  intermediaries
for controlling persons or statutory un- derwriters, then searching
inquiry is called for.


Distribution by Broker-Dealers of Unregistered Securities,  Securities
Act Rel. No. 33-4445 (Feb. 2, 1962). The circum- stances facing
Wonsover did not involve a modest offer, a  widely traded security or
a customer with no relationship to  the issuer. Rather, the Gil-Med
shareholders whose names  Gibori gave Wonsover offered him a
substantial block of a  little-known and thinly traded security under
circumstances  raising questions not only as to whether the ostensible
sellers  may have been intermediaries for controlling persons or 
statutory underwriters but also whether they even existed.  Clearly, a
"searching inquiry" was called for.


Wonsover failed to investigate the Gil-Med accounts de- spite Gibori's
unusual degree of control over the accounts,  many of the
shareholders' apparent affiliation with Gil-Med,  the sheer amount of
shares involved for a thinly traded stock  (nearly equaling the public
float), the inconsistent account  documentation and his difficulty in
securing RSD clearance.  We conclude that substantial evidence
supports the Commis- sion's finding that Wonsover's inquiry was not
reasonable  under the circumstances and that the Commission did not
err  in determining that his resulting violations were willful under 
our traditional formulation of willfulness for the purpose of  section
15(b) or even under the subjective recklessness stan- dard Wonsover
presses.12 Precedent will not suffer Wons- over's argument that he
justifiably relied on the clearance of 




__________

n 12 Our decision upholding the Commission's finding of willfulness 
leaves Wonsover no room to argue that he conducted a reasonable 
inquiry (or was unaware of circumstances foreclosing the exemp- tion)
and that the sales were thus exempt under section 4(4) of the  1933


sales by the RSD, the transfer agent and counsel. See, e.g.,  O'Leary
v. SEC, 424 F.2d 908, 912 (D.C. Cir. 1970) (reliance  on advice of
counsel potentially mitigating but not exculpato- ry); Sorrell v. SEC,
679 F.2d 1323, 1327 (D.C. Cir. 1982)  (broker's reliance on counsel's
advice did not excuse his own  lack of investigation); Stead v. SEC,
444 F.2d 713, 716 (10th  Cir. 1971) ("The act of ... calling the
transfer agent is  obviously not a sufficient inquiry."); A.G. Becker
Paribas  Inc., 48 S.E.C. 118, 121 (1985) ("If a broker relies on
others to  make the inquiry called for in any particular
circumstances, it  does so at its peril."). As Paine Webber's Rule 144
Manual  cautioned, "[a]n investment executive ... has the primary 
responsibility to prevent illegal sales of restricted or control 
stock." Brief of Commission at 18.


Wonsover's argument that the sanction should be reduced  also fails.
The statute authorizing the Commission to sus- pend Wonsover limits
when and how the sanction can be  imposed. The Commission must
"find[], on the record after  notice and opportunity for hearing, that
such ... suspension  ... is in the public interest." 15 U.S.C. s
78o(b)(4). The  Commission complied with the statute's directives and
ex- pressly considered, among other aggravating and mitigating 
factors, "the effect of Wonsover's misconduct on both the  securities
industry as a profession and on the investing  public." JA 24-25. The
sanction fell within the spectrum of  the Commission's statutory
authority, see 15 U.S.C.  s 78o(b)(4); s 77h-1, and choosing a point
on that spectrum  is a determination left to the Commission. See
O'Leary, 424  F.2d at 912 ("[A]s to petitioners' protest that they
'were first  offenders,' acting in accord with advice of counsel, and
caus- ing no injury to the investing public, we concur with Chief 
Judge Lumbard's statement in Tager v. SEC, 344 F.2d 5, 8  (2d Cir.
1965): 'While these factors might have warranted a  lighter sanction,


For the foregoing reasons, we conclude that substantial  evidence
supports the Commission's determination that  Wonsover failed to
conduct reasonable inquiry into the  sources of the unregistered
shares he sold and that his  inadequate inquiry in the face of several
"red flags" justified 


a finding of willfulness. In addition, we find no abuse of  discretion
in the Commission's chosen sanction. Accordingly,  Wonsover's petition
for review is


Denied.